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Tuesday, January 19, 2016

AAPL 2016 Update #64 (Stock Purchase)

With earnings season starting this week for the SP500, I am going to place the last part of the collar in place just before earnings.

Volatility is starting to come back in a little so we may in for a relief rally in the markets.

I am going to place the hedge just a little inside the expected move range for earnings. While I could move the strike just a little further, that will increase my downside risk.

By placing the strike at the 103 level, I have managed to create a collar where the breakeven is exactly at 95. In the process I will also be buying some stock.

The stock is currently trading over 6pts away from this short strike.

Trades

Part 1 - Roll calls

+8c Jan 22' 102 Call @ 0.18

-8c Jan 29' 103 Call @ 1.32

Net Credit 1.14

Part 2 - Purchase stock

+9 shrs AAPL @ 97.72

Total of shares of AAPL is now 817

Here is the risk profile for the trade. Notice there is no downside risk, but because of the short strike being quite far (I am expecting a move upwards), there is significant theta risk in the position.